GM: Future Is Electric but Profits Are in Pickups, SUVs
Detroit — General Motors declared that the auto industry’s future is electric just as Americans’ rekindled demand for pickup trucks, SUVs and crossovers are driving the bulk of the automaker’s profits.
“The company believes the future is electric, with billions (of dollars) of investment to support an all-in-house approach to the development and manufacturing of electrified vehicles,” GM said in its annual sustainability report released last week.
GM has 180,834 electrified vehicles on U.S. roads, and it is preparing to launch the second generation of the Chevrolet Volt. Next year it will introduce an all-electric Chevrolet Bolt that will be able to travel 200 miles between charges and be priced at about $30,000 after state and federal tax incentives.
But Chevrolet and GMC sold 235,927 Silverado and Sierra pickup trucks in the first four months of this year alone. Of $5.4 billion GM is investing in its 40 U.S. factories over the next four years, $1.2 billion, or more than 20 percent, is targeted for expansion of the Arlington, Texas assembly plant that will produce nearly 300,000 full-size SUVs this year.
The company acknowledges it will fall short of its goal of having 500,000 vehicles on U.S. roads by 2017 with some form of electrified powertrain.
Trucks and SUVs are an important and very profitable segments of the American market. Americans want them and are quite willing to pay between $45,000 and $80,000 for them. Responding to that demand is smart business.
The sustainability report, however, is meant to make investors, consumers and government regulators aware that GM is pursuing new technologies that may rely less on fossil fuels and require different transportation choices in the future.
“GM will take a leading role in the auto industry’s transformation as it undergoes an unprecedented period of change,” said Bob Ferguson, GM senior vice president for global public policy, said in the report.
In addition to the 2016 Volt and the Bolt, GM last month said it would offer a hybrid option on the 2016 Chevrolet Malibu, and offer the redesigned Chevrolet Spark EV in a third state, Maryland. The previous Spark EV was sold only in California and Oregon.
It is also developing a hybrid version of the new Cadillac CT6 that will first go on sale in China next year.
While the company doesn’t disclose the profitability or losses for individual models, analysts believe that none of the electrified models are making money.
They are, however, essential if GM is to comply with federal fuel economy standards that require an average of 54.5 miles per gallon across all models sold in the U.S. by 2025. The government will review the viability of that standard in 2017, but GM so far has said it intends to meet it.
Lower gas prices and stronger consumer confidence have bolstered Americans ongoing shift back to larger vehicles, which also have achieved improved fuel economy with the introduction of each new model.
“The challenge is compounded even more in markets outside the U.S., where mandates and regulations can be as stringent as those in the U.S. or Europe, but average incomes are significantly lower,” GM states in the report.
In certain countries there’s little or no demand for all-electric or hybrid vehicles unless the government provides sizable incentives for buying them.
Despite that, GM highlights other environmentally progressive accomplishments. Those include making 122 facilities landfill-free, eliminating methane-generating waste. Methane and carbon dioxide are the two biggest sources of greenhouse gas that is contributing to climate change.
GM stopped burning coal last year at all North American plants and boosting the use of renewable energy in the last year to 105 megawatts from 66 megawatts. The report also touts that the automaker is more than halfway toward goals of reducing its water use by 15 percent between 2010 and 2020, cutting carbon emissions from manufacturing sites by 20 percent in the same period, and eliminating 40 percent of all waste by the end of the decade.